The use of credit and debit cards and payment devices, such as contactless payment devices and/or payment cards for transactions is ever increasing. Whether over the telephone, through the mail, at retail terminals, vending machines, or over the Internet, the need to perform transactions using payment devices is a common one. Such transactions offer the possibility of fraud, however, such as when a lost or stolen payment device is used by a wrongdoer to purchase goods or services. Fraud can be especially problematic in non-face-to-face transactions.
One approach to minimizing fraud is through the use of a payment device with an integrated circuit chip, such as a smart card. Often, these types of payment devices are used together with a secret code, password, or PIN known only to the card holder and the financial institution issuing the payment card. The combination of intelligent payment device and a PIN at the time of a transaction is commonly known as two-factor authentication. In this model, the payment device typically stores secret data, such as a cryptographic key, or key pair. The secret information is often stored in protected memory on the payment device, and is used during the transaction to create a cryptogram, digital signature, authentication code, or other data that can not be correctly generated without access to the secret data that is contained inside the payment device. Additionally, the PIN is used during the transaction and is verified before permitting the transaction. In this way, a transaction that includes data generated using the secret data on a payment device, and a valid PIN, is judged to be reasonably authentic because it involved a presumably authentic payment card and a person with access to a secret PIN.
In some situations, such as when performing an Internet transaction, it is not possible to validate a PIN at the time of the transaction because no terminal is available to enter the PIN, or in those situations where the PIN is validated by the payment device, there is no way to transmit the PIN into the payment device for verification. One technique to permit PIN verification in these situations is to turn a cell phone into a combined PIN entry device and payment device. In that technique, the cell phone may store both secret data, such as a cryptographic key, and secret PIN data. This technique is described in further detail in International Publication Number WO 2006/023839 A2, entitled “METHOD AND SYSTEM FOR AUTHORIZING A TRANSACTION USING A DYNAMIC AUTHORIZATION CODE” assigned to MasterCard International, Inc., and that publication is incorporated herein by reference in its entirety. In this approach, a payment application to be stored on a cell phone must be individually personalized for the particular account with which it is associated. Additionally, because cell phone memory may not be as secure as the memory associated with traditional intelligent payment devices, such as smart cards, special precautions must be made to prevent a secret key stored in the memory of the phone to be extracted and/or used to perform a fraudulent transaction.